Bill of Materials (BOM)
Definition
The list of components, quantities and costs needed to make or assemble one finished product. It is the recipe your unit cost is built from.
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Formula
Unit Cost = Σ (Component Qty × Component Cost) + Assembly Labor + PackagingA BOM lets your inventory system relieve the right components when a finished product sells, which is what keeps component stock and COGS accurate for bundles, kits and manufactured goods.
BOMs need updating whenever a component price or packaging changes. Watch for: BOMs that have not been touched since launch, because your margin reports are only as current as the costs inside them.
Example
A gift set uses 1 candle ($4.10), 1 diffuser ($3.25), a box ($0.90) and $0.75 of assembly labor, for a unit cost of $9.00.